Retail

Spending continues

Wednesday December 10, 2014Masrur Alam Khan

The latest data reveals that Kiwis have spent more in 2014 than they had done in the previous year. The September 2014 quarter sales for both the core retail sector and the total retail industry increased by more than 4 percent on year-earlier levels. The core sector measure excludes the motor vehicle sales, service and petrol sub-sectors.

This momentum will in all probability continue into the next quarter as consumers prepare for Christmas and New Year shopping. New Zealand consumers have received good value for their money due to a strong Kiwi dollar, sector wide price discounting and a fall in producer prices as reflected in the sales volumes that have increased by almost 4.5 percent in the last 12 months.

The strongest growth in turnover occurred in the bar, cafe & accommodation sub-sector (up 8 percent on year-earlier levels) while the strongest growth in volume was recorded by the furniture, hardware and appliances sub-sector (up 9 percent). This suggests that solid growth in tourism and migration over the past year has had a noticeable effect on the hospitality industry while retailers are still willing to pass on their reduced importation costs through price discounting.

The supermarkets did not perform particularly well, with this sub-sector barely managing to post positive growth.

It is worth noting that the motor vehicles and related sub-sector also performed well with turnover rising by almost 4 percent on year-earlier levels. This was primarily driven by strong demand for new motor vehicles which according to motor vehicle registration data rose by 22 percent (or the equivalent of another 37,650 vehicles) throughout New Zealand in the same time period The Auckland region accounted for almost half of all newly registered motor vehicles followed by Canterbury (17 percent) and Waikato (9 percent).

Although there are usually many factors (such as taxes and registration fees) that have to be considered when trying to explain growth in the demand for motor vehicles, in this case it is safe to say that it is primarily being driven by the strong exchange rate; especially against the Yen. Electronic card transaction data confirms the pick-up in spending. The value of transactions for the 3 months to October was up more than 5 percent on year-earlier levels.

Regionally, the growth in retail sales is led by Canterbury and Auckland. These regions are recording turnover at 5 to 6 percent up on year earlier. Wellington also chipped in with a modest 2 percent growth on the previous year. This is consistent with the recent increase in migration, as well as the impact of the ongoing infrastructure re-build in Christchurch.

In contrast the Waikato region has struggled. Turnover in the latest quarter has remained steady when compared to year-earlier levels; this has in turn taken the average for the last 12 months to about 2 percent below last year’s total.